Financial Markets, Industry Dynamics and Growth

Maurizio Iacopetta (), Raoul Minetti and Pietro Peretto
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Maurizio Iacopetta: OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po

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Abstract: This article introduces corporate governance frictions into a growth model with endogenous market structure. Managers engage in corporate resource diversion and empire building. Shareholders discipline managers with incentive compensation contracts. A reform that mitigates corporate governance frictions boosts firms' entry and, for a given market structure, has an ambiguous impact on incumbents' return to product improvement. However, as the market structure adjusts, becoming more diffuse, incumbents invest less in product improvement. Calibrating the model to U.S. data, we find that a reform of the kind recently enacted in several advanced economies can lead to a welfare loss.

Keywords: Financial markets; Industry dynamics; Growth (search for similar items in EconPapers)
Date: 2019-07
Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-03403582v1
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Published in The Economic Journal, 2019, 129 (621), pp.2192 - 2215. ⟨10.1111/ecoj.12635⟩

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Related works:
Journal Article: Financial Markets, Industry Dynamics and Growth (2019)
Working Paper: Financial Markets, Industry Dynamics and Growth (2019)
Working Paper: Financial Markets, Industry Dynamics, and Growth (2015)
Working Paper: Financial, markets, industry dynamics and growth (2014)
Working Paper: Financial markets industry dynamics and growth (2014)
Working Paper: Financial markets industry dynamics and growth (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:spmain:hal-03403582

DOI: 10.1111/ecoj.12635

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